Tang, Chor Foon and Shahbaz, Muhammad (2011): Revisiting the Electricity Consumption-Growth Nexus for Portugal: Evidence from a Multivariate Framework Analysis.
Download (108Kb) | Preview
The aim of present paper is to re-investigate the long-run and causal relationship between electricity consumption, income, financial development, population and foreign trade in Portugal using the bounds testing approach to cointegration within the unrestricted error-correction model (UECM). The Granger causality test within the Vector Error-Correction Model (VECM) was conducted to examine the direction of causality. This study covered the annual sample of 1971 to 2009. Our empirical evidence supports the presence of a long-run relationship between the variables in Portugal. Moreover, the results indicate that increase in real income, financial development, population and foreign trade has positive impact on electricity consumption in Portugal. In addition, the overall Granger causality results exhibit bi-directional causal relationship between electricity consumption, real income, and population while uni-directional causality is running from financial development to electricity consumption. In this respect, Portugal is an energy dependent country, thus energy conservation policy (growth policy) may adversely affect the economic growth (environment or pollution) in Portugal. Ultimately, the Portuguese government should encourage research and development on technological innovation for energy savings without affecting economic development in Portugal.
|Item Type:||MPRA Paper|
|Original Title:||Revisiting the Electricity Consumption-Growth Nexus for Portugal: Evidence from a Multivariate Framework Analysis|
|Keywords:||Causality; electricity consumption; financial development; Portugal|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q20 - General
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O52 - Europe
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy
|Depositing User:||Chor Foon Tang|
|Date Deposited:||26. Jan 2011 09:06|
|Last Modified:||12. Feb 2013 09:07|
Abeysinghe, T. and Tan, K.B. (1999) Small sample estimation of a cointegrating vector: An empirical evaluation of six estimation techniques. Applied Economics Letters, 6, pp. 645-648.
Abosedra, S., Dah, A. and Ghosh, S. (2009) Electricity consumption and economic growth, the case of Lebanon. Applied Energy, 86, pp. 429-432.
Acaravici, A. (2010) Structural breaks, electricity consumption and economic growth: evidence from Turkey. Journal for Economic Forecasting, 2, pp. 140-154.
Acaravici, A. and Ozturk, I. (2010) Electricity consumption-growth nexus: Evidence from panel data for transition countries. Energy Economics, 32(2), pp. 604-608.
Aktas, C. and Yilmaz, V. (2008) Causality between electricity consumption and economic growth in Turkey. ZKÜ Sosyal Bilimler Dergisi, 4, pp. 45–54.
Altinay, G. and Karagol, E. (2005) Electricity consumption and economic growth: evidence from Turkey. Energy Economics, 27, pp. 849-856.
Amano, R.A. and van Norden, S. (1992) Unit-root tests and the burden of proof. Working paper, 92-7, Bank of Canada, Ottawa, ON.
Ang, J.B. (2007) CO2 emissions, energy consumption, and output in France. Energy Policy, 35, pp. 4772–4778.
Apergis, N. and Payne, J.E. (2010) Energy consumption and growth in South America: Evidence from a panel error correction model, Energy Economics, 32, pp. 1421-1426.
Aqeel, A. and Butt, M.S. (2001) The relationship between energy consumption and economic growth in Pakistan. Asia-Pacific Development Journal, 8, pp. 101-110.
Batliwala, S. and Reddy, A.K.N. (1994) Energy consumption and population, In Francis Graham-Smith, ed., Population: The Complex Reality. The Royal Society, London.
Böhm, D.C. (2008) Electricity consumption and economic growth in the European Union: A causality study using panel unit root and cointegration analysis. University of Hohenheim / Robert Bosch GmbH, Germany.
Chandran, V.G.R., Sharma. S. and Madhavan. K. (2009) Electricity consumption–growth nexus: The case of Malaysia. Energy Policy, 38, pp. 606-612.
Chang, T., Fang, W. and Wen, L.F. (2001) Energy consumption, employment, output and temporal causality: Evidence from Taiwan based on cointegration and error-correction modelling techniques. Applied Economics, 33, pp. 1045-1056.
Chen, S.T., Kuo, H.I. and Chen, C.C. (2007) The Relationship between GDP and Electricity Consumption in 10 Asian Countries. Energy Policy, 35, pp. 2611–2621.
Cheung, Y.W. and Chinn, M.D. (1997) Further investigation of the uncertain unit root in GNP. Journal of Business and Economic Statistics, 15, pp. 68-73.
Cheung, Y.W. and Lai, K.S. (1995) Lag order and critical values of the augmented Dickey-Fuller test. Journal of Business and Economic Statistics, 13, pp. 277-280.
Ciarreta, A. and Zarraga, A. (2010) Economic growth-electricity consumption causality in 12 European countries: A dynamic panel data approach. Energy Policy, 38, pp. 3790-3796.
Engle, R.F. and Granger, C.W.J. (1987) Co-integration and error correction: Representation estimation, and testing. Econometrica, 55, pp. 251-276.
Fatai, K., Oxley, L. and Scrimgeour, F. (2004) Modelling the causal relationship between energy consumption and GDP in New Zealand, Australia, India, Indonesia, the Philippines, and Thailand. Mathematics and Computer in Simulation, 64, pp. 431-445.
Ghosh, S. (2002) Electricity consumption and economic growth in Taiwan. Energy Policy, 30, pp. 125–129.
Granger, C.W.J. (1988) Causality, cointegration, and control. Journal of Economic Dynamics and Control, 12, pp. 551-559.
Gupta, G. and Chandra, S.N. (2009) Causality between electricity consumption and economic growth: Empirical evidence from India. http://mpra.ub.uni-muenchen.de/22942
Halicioglu, F. (2009) An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey, Energy Policy, 37, pp. 1156-1164.
Ho. C. and Sui, K. (2006) A dynamic equilibrium of electricity consumption and GDP in Hong Kong: An empirical investigation. Energy Policy, 35, pp. 2507-2513.
Jamil, F. and Ahmad, E. (2010) The relationship between electricity consumption, electricity prices and GDP in Pakistan. Energy Policy, 38, pp. 6016-6025.
Jumbe, C.B.L. (2004) Cointegration and causality between electricity consumption and GDP: Empirical evidence from Malawi. Energy Economics, 26, pp. 61–68.
Karanfil, F. (2009) How many times again will we examine the energy–income nexus using a limited range of traditional econometric tools? Energy Policy, 37, pp. 1191–119.
Kraft, J. and Kraft, A. (1978) On the relationship between energy and GNP. Journal of Energy and Development, 3, pp. 401–403.
Kwaitkowski, D., Phillips, P.C.B., Schmidt, P. and Shin, Y. (1992) Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics, 54, pp. 159-178.
Lean, H.H. and Smyth, R. (2010) Multivariate Granger causality between electricity generation, exports, prices and GDP in Malaysia. Energy, 35, pp. 3640-3648.
Lee, C.C. and Chang, C.P. (2007) The impact of energy consumption on economic growth: Evidence from linear and nonlinear models in Taiwan. Energy, 32, pp. 2282-2294.
Li, J., Song, H. and Geng, D. (2008) Causality relationship between coal consumption and GDP: Difference of major OECD and non-OECD countries. Applied Energy, 85, pp. 421-429.
Lorde. T., Waithe, K and Francis, B. (2010) The importance of electrical energy for economic growth in Barbados. Energy Economics, 32, pp. 1411-1420.
Lütkepohl, H. (1982) Non-causality due to omitted variables. Journal of Econometrics, 19, pp. 367-378.
Lütkepohl, H. (2005) New Introduction to multiple time series analysis. Germany: Springer-Verlag.
Masih, A.M.M. and Masih, R. (1997) On the temporal causal relationship between energy consumption, real income and price: Some new evidence from Asian NICs based on a multivariate cointegration/vector error-correction approach. Journal of Policy Modeling, 19, pp. 417-440.
Mozumder, P and Marathe, A. (2007) Causality relationship between electricity consumption and GDP in Bangladesh. Energy Policy, 35, pp. 395–402.
Murry, D.A. and Nan, G.D. (1996) A definition of the gross domestic product-electrification interrelationship. Journal of Energy and Development, 19, pp. 275-283.
Narayan, P.K., (2005) The saving and investment nexus for China: Evidence from cointegration tests, Applied Economics, 17, pp. 1979-1990.
Narayan, P.K. and Prasad, A. (2008) Electricity consumption-real GDP causality nexus: Evidence from a bootstrapped causality test for 30 OECD countries. Energy Policy, 36, pp. 910-918.
Narayan, P.K. and Singh, B. (2007) The Electricity consumption and GDP nexus for the Fiji Islands. Energy Economics, 29, pp. 1141-1150.
Narayan, P.K and Smyth, R. (2005) Electricity consumption, employment and real income in Australia: Evidence from multivariate granger causality Tests. Energy Policy, 33, pp. 1109-1116.
Narayan, P.K. and Smyth, R. (2009) Multivariate Granger causality between electricity consumption, exports and GDP: Evidence from a panel of Middle Eastern countries. Energy Policy, 37, pp. 229-236.
Odhiambo, N.M. (2009a) Energy consumption and economic growth nexus in Tanzania: An ARDL bounds testing approach, Energy Policy, 37, pp. 617-622.
Odhiambo, N.M. (2009b) Electricity consumption and economic growth in South Africa: A trivariate causality test. Energy Economics, 31, pp. 635-640.
Ouédraogo, M. (2010) Electricity consumption and economic growth in Burkina Faso: A cointegration analysis. Energy Economics, 3, pp. 524-531.
Ozturk, A. (2010) A literature survey on energy-growth nexus. Energy Policy, 38, pp. 340-349.
Ozturk I. and Acaravci, A. (2010) The causal relationship between energy consumption and GDP in Albania, Bulgaria, Hungary and Romania: Evidence from ARDL bound testing approach. Applied Energy, 6, pp. 1938-1943.
Payne, J.E. (2009) On the dynamic of energy consumption and output in the US. Applied Energy, 86, pp. 575-577.
Payne, J.E. (2010). A survey of the electricity consumption-growth literature. Applied Energy, 87, pp. 723-731.
Pesaran, M.H. and Shin, Y. (1999) An autoregressive distributed-led modelling approach to cointegration analysis. In Econometrics and Economic Theory in the 20th Century. The Ragnar Frisch Centennial Symposium, ed. Steinar Strom. Cambridge: Cambridge University Press.
Pesaran, M.H., Shin, Y. and Smith, R. (2001) Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16, pp. 289-326.
Sadorsky, P. (2010) The impact of financial development on energy consumption in emerging economies. Energy Policy, 38, pp. 2528-2535.
Shahbaz, M. (2009) A reassessment of finance-growth nexus for Pakistan: Under the investigation of FMOLS and DOLS techniques. IUP Journal of Applied Economics, 8, pp. 65-80.
Shahbaz, M., Ahmad, K. and Chaudhary, A. R. (2008) Economic growth and its determinants in Pakistan. Pakistan Development Review, 47, pp. 471-486.
Shahbaz. M., Shamim, A. and Naveed, A. (2010) Macroeconomic environment and financial sector's performance: Econometric evidence from three traditional approaches. IUP Journal of Financial Economics, 8, pp: 103-123.
Shiu, A. and Lam, P.L. (2004) Electricity consumption and economic growth in China. Energy Policy, 32, pp. 47-54.
Squalli, J. and Wilson, K. (2006) A bounds analysis of electricity consumption and economic growth in the GCC. Working Paper -06-09, EPRU, Zayed University.
Squalli, J. (2007) Electricity consumption and economic growth: Bounds and causality analysis for OPEC members. Energy Economics, 29, pp. 1192–1205.
Tang, C.F. (2008) A re-examination of the relationship between electricity consumption and economic growth in Malaysia. Energy Policy, 36, pp. 3077-3085.
Tang, C.F. (2009) Electricity consumption, income, foreign direct investment, and population in Malaysia: New evidence from multivariate framework analysis. Journal of Economic Studies, 36, pp. 371-382.
Toda, H.Y. and Yamamoto, T. (1995) Statistical inferences in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66, pp. 225-250.
Turner, P. (2006) Response surfaces for an F-test for cointegration. Applied Economics Letters, 13, pp. 479-482.
Warr, B.S. and Ayres, R.U. (2010) Evidence of causality between the quantity and quality of energy consumption and economic growth. Energy, 35, pp. 1688-1693.
Wolde-Rufael, Y. (2006) Electricity consumption and economic growth: A time series experience for 17 African countries. Energy Policy, 34, pp. 1106–1114.
Yang, H.Y. (2000) A note on the causal relationship between energy and GDP in Taiwan. Energy Economics, 22, pp. 309-317.
Yan, D. and Zhang, L.J. (2009) Financial development and energy consumption: An empirical research based on Guangdong Province, in International Conference on Information Management, Innovation Management and Industrial Engineering, pp. 102-105.
Yoo, S.H. and Kwak, S. (2010) Electricity consumption and economic growth in Seven South American countries. Energy Policy, 38, pp. 180-188.
Yoo, S.H. (2006) The causal relationship between electricity consumption and economic growth in ASEAN countries. Energy Policy, 34, pp. 3573-3582.
Yoo, S.H. and Kim, Y. (2006) Electricity generation and economic growth in Indonesia. Energy, 31, pp. 2890-2899.
Yoo, S.H. (2005) Electricity consumption and economic growth: Evidence from Korea. Energy Policy, 33, pp. 1627-1632.
Yuan, J., Zhao, C., Yu, S., Hu, Z. (2007) Electricity consumption and economic growth in China: Cointegration and co-feature analysis. Energy Economics, 6, pp. 1179-1191.
Zachariadis, T and Pashourtidou, N. (2007) An empirical analysis of electricity consumption in Cyprus. Energy Economics, 29, pp. 183-198.